Blackstone Inc.

Good day, everyone, and welcome to the Blackstone Third Quarter 2022 Investor Call, hosted by Westin Tucker, Head of Shareholder Relations. My name is Ben, and I'm your event manager. During the presentation, your lines will remain on listen only. If you require assistance at any time, please press star zero on your device, and the coordinator will be happy to assist you. I'd like to advise all parties that this conference is being recorded for replay purposes. For questions, please press star one on your device. And now, I would like to hand it over to your host. Bestin, the word is yours.

Great. Thanks, Ben. And good morning, everyone, and welcome to Blackstone's third quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO, John Gray, President and Chief Operating Officer, and Michael Che, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-Q report in a few weeks. I'd like to remind you that today's call may include forward-looking statements which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the risk factor section of our 10-K. We'll also refer to non-GAAP measures, and you'll find reconciliations in the press release on the shareholders' page of our website. Also, please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase in interest in any Blackstone fund. Saudiocast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $4 million. Distributable earnings were $1.4 billion, or $1.06 per common share, and we declared a dividend of $0.90 per common share, which will be paid to holders of record as of October 31st. With that, I'll turn the call over to Steve. Thank you, Weston. Good morning, and thank you for joining our call.

The third quarter of 2022 was a continuation of one of the most difficult periods for markets in decades. Global markets extended the dramatic sell-off that characterized the first half of the year, the S&P 500 falling another 5%, bringing the year-to-date decline to 24%. The public REIT index was down 10% in just a quarter, and 28% year-to-date. The NASDAQ fell 32% year-to-date. And in debt markets, high-grade and high-yield bonds declined 14% to 15% in the first nine months of the year. High inflation, rising interest rates, and a slowing economy combined with ongoing geopolitical turmoil have created an extremely difficult environment for investors to navigate. The traditional 60-40 portfolio is down over 20% year-to-date, its worst performance in nearly 50 years, and sentiment in almost all areas is likely to remain negative given the Fed's commitment to continue increasing interest rates to combat inflation. Against this highly challenging backdrop, Blackstone delivered excellent results for our shareholders. Fee-related earnings for the third quarter rose 51% year over year to $1.2 billion, representing our second-best quarter on record. We generated strong distributable earnings of $1.4 billion, or $1.06 a share, as West noted. While most money managers focusing on liquid markets have seen declining AUM, we've continued to grow. Our assets under management increased 30% year over year to a record $951 billion, with strong demand for our products across the institutional, private wealth, and insurance channels. Just last week, we announced our fourth major partnership in the insurance space with Resolution Life, a leading life and annuity block consolidator, which we expect to comprise approximately $25 billion of AUM in the first year and over $60 billion over time as their platform grows. A feat of Blackstone success with our customers is that we have protected their capital through these remarkable market declines. One of our core principles since we founded the firm in 1985 is to avoid losing our clients' money, and we've done an excellent job of that. As the largest and most diverse alternatives firm in the world, we have unique access to data and insights on what is happening in the global economy, allowing us to anticipate trends and, we believe, minimize risk. We then carefully choose sectors and which type of assets to buy and actively work to build great companies and platforms. We use this advantage as well to help determine areas of focus in the liquid securities area. This synergistic approach has led to distinctly strong positioning across our business today. For example, in real estate, approximately 80% of our portfolio is in sectors where rents are growing above the rate of inflation, including logistics, rental housing, life science office, and hotels. In corporate private equity, Our emphasis on faster-growing companies has resulted in a 17% year-over-year revenue growth in our operating companies in the third quarter, led by our travel and leisure-related holdings. That's 17% growth in revenue as the economy is slowing all over the world. This is a stunning result given the size of our portfolio. which in total across our private equity business employs approximately 500,000 people. In corporate and real estate credit, we benefit from close to 100% floating rate exposure, and we're experiencing negligible defaults. Our hedge fund solutions business is performing remarkably well with the BPS composites achieving positive returns in the third quarter and every quarter so far in 2022. This is a highly differentiated outcome in liquid securities compared to the year-to-date decline of 24% in the S&P. Blackstone's long history of outperformance in capital protection is, of course, critically important to our LPs and their constituents. They have found it difficult to achieve their objectives by investing in traditional asset classes alone. That's why LPs around the world are choosing to increase allocations to alternatives, in particular to Blackstone. Recent research from Morgan Stanley estimates the private markets AUM will grow 12% annually Over the next five years, we share growth in areas such as infrastructure, real estate, and private credit as investors seek yield and inflation protection, all areas of distinctive competence here at Blackstone. From a channel perspective, Morgan Stanley predicts the greatest growth among individual investors with allocations to alternatives from high net worth investors more than doubling in five years to 8% to 10% of their portfolios. This represents a major paradigm change, one we identified over a decade ago, and trillions of dollars of opportunity, which John will discuss in more detail. Blackstone is the clear leader in this channel, with the largest market share among alternative managers. Blackstone occupies a special status with customers and potential customers around the world. They are facing significant uncertainties today and are looking to us to help them navigate these challenges. And we believe we are uniquely positioned to do so. We are proud of the trust they place in us and we remain steadfast in our mission to serve them. In closing, Our firm has prospered across the many cycles of the past 37 years since we started. We had no assets then, and today we're closing in on a trillion dollars of AUM. Historically, we've taken advantage of the pullbacks to deploy significant capital at attractive prices, extend our leadership position across business lines, and invest in new initiatives as well as in our people. For our shareholders, this has translated into extraordinary growth, and we have no intention of slowing down. We are in the early innings of penetrating new channels and markets with enormous potential, and the firm's earnings power continues to expand, concentrated in the highest quality earnings. Even though the investment climate is challenging, we have the confidence, the resources, and the loyalty of our customers and our people to continue to develop our franchise for the benefit of all of our constituencies. And with that, I'll turn it over to John.